iStockPhoto
iStockPhoto

DYK: You can be penalized for not maintaining books of accounts

Not maintaining or providing documents to the assessing officer when demanded may lead to penalty

Once you file your income tax returns (ITR), you also need to keep and maintain the documents on the basis of which you have filed your returns. Documents related to incomes and expenses, investments, deductions, exemptions, tax deducted at source and self assessment tax paid are few that need to be maintained by the income tax assessee. Not maintaining or providing documents to the assessing officer when demanded may lead to penalty.

FOR SALARIED INDIVIDUALS

A salaried individual should keep all the relevant documents till the assessment of the ITR is done by the income tax department. Once the assessment of return is completed, the I-T department sends you an intimation regarding the same. If there is a mismatch, you may need to make changes and respond, for which you may need the specific documents. However, if there is no mismatch in the tax return filed by you and the data available with the department, then you may not require documents further.

If you have income besides salary received from your employer, or have declared such income in your ITR, or claimed exemption or deduction which is not part of Form 16, then such documents need to be maintained. It may be that deduction or exemption is claimed in the following years, in which case, again, relevant documents will be needed. For instance, to carry forward long-term capital losses so that it can be adjusted against capital gains in following years, you should keep records of such a capital loss. The I-T department has not prescribed a time limit for how long one should maintain her documents. But ideally one should keep them for the next 5-6 assessment years.

FOR PROFESSIONALS

Professionals need to compulsory maintain document records, based on the profession as stipulated under section 44AA of the Income-tax Act, 1961. There are two categories of professions. “Specified professions" include legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, film artist and company secretariship. “Non-specified professions" will include any line of work that is not a specified profession.

Documents to be maintained depend upon annual income and turnover. For instance, one does not have to maintain books of accounts in case the gross receipts do not exceed 1.5 lakh in any one of the three years immediately preceding the previous year. If the practice was set up only in the previous financial year, and again gross receipts for that year is not expected to exceed 1.5 lakh, then such professionals need not maintain any books of accounts.

In general, one needs to maintain ledgers, day books, cash books, account books, and others, in written form or as print-outs of data stored on, say, an electronic data storage device.

One needs to maintain such documents for following six assessment years. For instance, documents related to assessment year 2015-16 have to be maintained till assessment year 2021-22. If one fails to maintain it, the assessing officer can levy a penalty as high as 25,000.

Close